What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-05-08 compared with 2025-11-10 · 252 added, 476 removed, 305 unchanged (70% of the section changed)

16 unchanged sentences

our operations in March 1991.

From inception through September 30, 2025, we have originated a total of approximately $24.3 billion of

automobile contracts, primarily by purchasing retail installment sales contracts from dealers, and to a lesser degree, by originating

loans secured by automobiles directly with consumers.

In addition, we acquired a total of approximately $822.3 million of automobile contracts

in mergers and acquisitions in 2002, 2003, 2004 and 2011.

Recent contract purchase volumes and managed portfolio levels are shown in the

Contract Purchases and

Outstanding Managed Portfolio

From inception through March 31, 2026, we have originated a total of approximately $25.2 billion of automobile

contracts from dealers, and to a lesser degree, by originating loans secured by automobiles directly with consumers.

Our recent history

of contract purchase volumes and managed portfolio levels are shown in the table below.

Managed portfolio comprises both contracts we

owned and those we were servicing for third parties.

Contract Purchases and Outstanding Managed Portfolio

$ in thousands

1 unchanged sentence

Managed Portfolio at Period End

Nine months ended September 30, 2025

In May 2021 we began purchasing

some contracts for immediate sale to a third-party to whom we refer applications that don’t meet our lending criteria.

all such contracts on behalf of the third-party.

We earn fees for originating the receivable and also servicing fees on active accounts

in the third-party portfolio.

For the nine months ended September 30, 2025, we originated $11.0 million under this third-party program.

As of September 30, 2025, our managed portfolio includes $132.5 million of such third-party receivables.

Three months ended March 31, 2026

Our principal executive offices

34 unchanged sentences

108 term securitizations of automobile contracts that we originated.

As of September 30, 2025, 18 of those securitizations are active

and all are structured as secured financings.

We generally conduct our securitizations on a quarterly basis, near the beginning of each

calendar quarter, resulting in four securitizations per calendar year.

As of March 31, 2026, 19 of those securitizations are active and

all are structured as secured financings.

We generally conduct our securitizations on a quarterly basis, near the beginning of each calendar

quarter, resulting in four securitizations per calendar year.

Our recent history of term securitizations

is summarized in the table below:

Recent Asset-Backed Term

Securitizations

Recent Asset-Backed Term Securitizations

$ in thousands

1 unchanged sentence

Receivables Pledged in Term Securitizations

Nine months ended September 30, 2025

Three months ended March 31, 2026

Generally, prior to a securitization

1 unchanged sentence

We currently have short-term

funding capacity of $535 million over two credit facilities.

The first credit facility was established in May 2012 with Citibank, N.A.

This facility was most recently renewed in July 2024, extending the revolving period to July 2026, with an optional amortization period

through July 2027.

In addition, a subordinated lender was added to the credit facility in November 2024, effectively increasing our advance

rate to a maximum of 95% for eligible receivables across the facility.

The capacity was then increased from $200 million at the most recent

renewal date to $335 million in December 2024.

In November 2015, we entered

into another $100 million facility with Ares Agent Services, L.P..

In June 2022, we increased the capacity of that credit agreement from

$100 million to $200 million.

This facility was most recently renewed in March 2024, extending the revolving period to March 2026, followed

by an amortization period to March 2028.

funding capacity of $702.5 million over three credit facilities.

The first credit facility was established in May 2012.

This facility

was most recently renewed in July 2024, extending the revolving period to July 2026, with an optional amortization period through July

In addition, the capacity was increased from $200 million to $335 million in December 2024.

In November 2015, we entered into a $100 million

facility with Ares Agent Services, L.P.

In June 2022, we increased the capacity of our credit agreement from $100 million to $200 million.

This facility was most recently renewed in March 2024, extending the revolving period to March 2026, followed by an amortization period

to March 2028.

In March 2026, the revolving period was extended to April 2026.

There was nothing outstanding under this facility at March

In October 2025, we entered

into a new $167.5 million facility.

This facility has a two year revolving period to October 2027, with an optional amortization period

through April 2029.

In a securitization and in

17 unchanged sentences

In the transaction,

a qualified institutional buyer purchased $65.0 million of asset-backed notes secured by an 80% interest in a CPS affiliate that owns

the residual interests in five CPS securitizations issued from October 2023 through September 2024.

qualified institutional buyers purchased $50.0 million of asset-backed notes secured by an 80% interest in a CPS affiliate that owns the

residual interests in four CPS securitizations issued from January 2025 through October 2025.

The sold notes (“2026-1 Notes”),

3 unchanged sentences

Financial Covenants

Certain of our securitization

transactions and our warehouse credit facilities contain various financial covenants requiring certain minimum financial ratios and results.

warehouse credit facilities and our residual interest financings contain various financial covenants requiring certain minimum financial

Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels.

In addition, certain

of our debt agreements other than our term securitizations contain cross-default provisions.

Such cross-default provisions would allow

the respective creditors to declare a default if an event of default occurred with respect to other indebtedness of ours, but only if

such other events of default were to be accompanied by acceleration of such other indebtedness.

As of September 30, 2025, we were in compliance

with all such covenants.

certain securitization and non-securitization related debt contain cross-default provisions that would allow certain creditors to declare

a default if a default occurred under a different facility.

As of March 31, 2026 we were in compliance with all such financial covenants.

of Operations

Comparison of Operating Results

for the three months ended September 30, 2025, with the three months ended September30, 2024

the three months ended September 30, 2025, our revenues were $108.4 million, an increase of $7.8 million, or 7.8% from the prior year

revenue of $100.6 million.

The primary reason for the increase in revenues is the increase in interest income resulting from the increase

in the average outstanding balance of finance receivables measured at fair value.

Revenues for the three months ended September 30, 2025,

did not include a mark to the recorded value of the finance receivables measured at fair value.

Marks are estimates based on our evaluation

of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and increases

or decreases in our estimates of future net losses.

for the three months ended March 31, 2026, with the three months ended March 31, 2025

the three months ended March 31, 2026, our revenues were $112.3 million, an increase of $5.5 million, or 5.1% from the prior year revenue

of 106.9 million.

The primary reason for the increase in revenues is the increase in interest income resulting from the increase in the

average outstanding balance of finance receivables measured at fair value.

Revenues for the three months ended March 31, 2026, did not

include a mark to the recorded value of the finance receivables measured at fair value.

Marks are estimates based on our evaluation of

the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and increases or

decreases in our estimates of future net losses.

In the current period, our re-evaluation of the fair values of these receivables resulted

2 unchanged sentences

Interest income for the three

months ended September 30, 2025, increased $14.0 million, or 15.0%, to $107.2 million from $93.2 million in the prior year.

reason for the increase in interest income is the 14.2% increase in the average balance of our loan portfolio over the prior year period.

The interest yield on our total loan portfolio is 11.4% for both current and in the prior period.

months ended March 31, 2026, increased $6.8 million, or 6.7% to $108.7 million from $101.9 million in the prior year.

The primary reason

for the increase in interest income is the 7.9% increase in the average balance of our loan portfolio over the prior year period.

interest yield on our total loan portfolio decreased to 11.3% from 11.4% in the prior year period.

The interest yield on receivables measured

at fair value is reduced to take account of expected losses and is therefore less than the yield on other finance receivables.

below shows the average balance and interest yield of our loan portfolio for the three months ended September 30, 2025 and 2024:

Three Months Ended September 30,

below shows the average balance and interest yield of our loan portfolio for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

(Dollars in Thousands)

1 unchanged sentence

Loan Portfolio

Other income was $1.3 million for the three months ended September

Other income was $3.6 million for the three months ended March

31, 2026, compared to $1.4 million for the comparable period in 2025.

This $667,000 decrease was primarily driven by the decrease in origination

and servicing fees we earned from third party receivables.

These fees were $1.2 million for the quarter ended September 30, 2025, compared

to $1.6 million in the prior year period.

This $2.2 million increase was primarily driven by the dealer recoveries

collected for the three months ending March 31, 2026.

These dealer recoveries were $2.3 million for the quarter ended March 31, 2026.

There were no dealer recoveries in the prior year period.

The Company engaged a third party that identifies discrepancies in the values

of the vehicles that have been repossessed and sold at auction.

The third party attempts to collect the amount of the discrepancy from

the dealers and remits the amounts collected to the Company net of fees charged.

Our operating expenses

consist largely of interest expense, employee costs, sales and general and administrative expenses.

Interest expense is significantly

affected by the volume of automobile contracts we purchased during the trailing 12-month period and the use of our warehouse facilities

and asset-backed securitizations to finance those contracts.

Employee costs and general and administrative expenses are incurred

as applications and automobile contracts are received, processed and serviced.

Factors that affect profit margins and net income include

changes in the automobile and automobile finance market environments, and macroeconomic factors such as interest rates and changes in

the unemployment level.

consist largely of interest expenses, employee costs, sales and general and administrative expenses.

Interest expense is affected by the

volume of automobile contracts we purchased during the trailing 12-month period and the use of our warehouse facilities and asset-backed

securitizations to finance those contracts and on the interest rates on these facilities.

Employee costs and general and administrative

expenses are incurred as applications and automobile contracts are received, processed and serviced.

Factors that affect margins and net

income include changes in the automobile and automobile finance market environments, and macroeconomic factors such as interest rates

and changes in the unemployment level.

Employee costs include base

7 unchanged sentences

Total operating expenses were

$101.4 million for the three months ended September 30, 2025, compared to $93.7 million for the prior period, an increase of $7.7 million,

$104.3 million for the three months ended March 31, 2026, compared to $100.1 million for the prior period, an increase of $4.2 million,

The increase is primarily due to increases in interest expense.

Employee costs were $23.0 million

during the three months ended September 30, 2025, compared to $24.2 million for the same quarter in the prior year, a decrease of $1.7

million, or 7.0%.

The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio

as of, and for the three-month periods ended, September 30, 2025, and 2024:

Three Months Ended September 30,

during the three months ended March 31, 2026, compared to $25.0 million for the same quarter in the prior year, a decrease of $2.0 million,

The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of,

and for the three-month periods ended, March 31, 2026, and 2025.

Three Months Ended March 31,

(Dollars in millions)

8 unchanged sentences

Total number of employees

Increases in headcount among our Sales staff during

the three-month period ended, March 31, 2026, and the decrease from the prior year period in the average cost of our Servicing staff,

were the largest contributing factors to the increase in headcount and decrease to employee costs for the three-month period ended, March

31, 2026 compared to the prior year period.

General and administrative expenses

1 unchanged sentence

services, and telecommunications.

General and administrative expenses were $13.4 million, an increase of $145,000 from $13.3 million in

General and administrative expenses were $12.9 million, a decrease of $345,000 from $12.6 million in

the prior year period.

Interest expense for the three

months ended September 30, 2025, was $59.1 million and represented 58.3% of total operating expenses, compared to $50.1 million in the

previous year, when it was 53.4% of total operating expenses.

The $9.0 million increase in interest expense compared to the prior year

period was largely due to increases in the average balance of our securitization trust debt, warehouse credit line debt and residual interest

financing debt.

To a lesser extent, the increase is also due to the increase in the interest rate on our securitization trust debt.

months ended March 31, 2026, was $60.1 million and represented 57.6% of total operating expenses, compared to $54.9 million in the previous

year, when it was 54.9% of total operating expenses.

Interest on securitization trust

debt increased by $4.6 million for the three months ended September 30, 2025, compared to the prior period.

debt increased by $3.7 million for the three months ended March 31, 2026, compared to the prior period.

The average balance of securitization

trust debt increased to $2.830 million for the three months ended September 30, 2025, compared to $2,706.3 million for the three months

ended September 30, 2024.

The annualized average rate on our securitization trust debt was 6.7% for the three months ended September 30,

trust debt increased to $3,127.4 million for the three months ended March 31, 2026, compared to $2,861.9 million for the three months

ended March 31, 2025.

The annualized average rate on our securitization trust debt was 6.2% for the three months ended March 31, 2026,

compared to 6.3% in the prior year period.

For each quarterly securitization transaction, the blended cost of funds is ultimately

the result of many factors including the market interest rates for benchmark swaps of various maturities against which our bonds are priced

For each quarterly securitization transaction, the blended cost of funds is ultimately the

result of many factors including the market interest rates for benchmark swaps of various maturities against which our bonds are priced

and the margin over those benchmarks that investors are willing to accept, which in turn, is influenced by investor demand for our bonds

6 unchanged sentences

Interest expense on warehouse

credit line debt increased by $2.7 million to $6.7 million for the three months ended September 30, 2025, compared to $4.0 million in

the prior year period.

The increase was primarily due to the higher utilization of our credit lines during the quarter compared to last

The average balance of our warehouse debt was $284.6 million during the three months ended September 30, 2025, compared to $132.3

million for the same period in 2024.

The annualized average rate on our credit line debt was 9.4% for the three months ended September

30, 2025, compared to 12.1% in the prior year period.

credit line debt was $6.5 million for the three months ended March 31, 2026, and in the same period prior year period.

The average balance

of our warehouse debt was $276.0 million during the three months ended March 31, 2026, compared to $275.8 million for the same period

The annualized average rate on our credit line debt was 9.4% for the three months ended March 31, 2026, consistent with the same

period in the prior year.

Interest expense on subordinated

renewable notes was $722,000 for the three months ended September 30, 2025.

renewable notes was $685,000 for the three months ended March 31, 2026.

The average balance of the outstanding subordinated debt was $28.7

$29.0 million for the three months September 30, 2025, compared to $23.2 million for the prior year period.

The average yield of subordinated

notes is 10.0% for both current and the prior period.

In June 2021, March 2024, and

again on March 20, 2025, we completed a securitization of residual interests from other previously issued securitizations in the amount

of $50 million, $50 million, and $65 million, respectively.

Interest expense for these residual interest financings was $4.1 million for

the three months ended September 30, 2025, compared to 2.5 million for the same period in 2024.

million for the three months March 31, 2026, compared to $26.9 million for the prior year period.

The average yield of subordinated notes

is 9.6% for both current and the prior period.

In June 2021, March 2024, March

20, 2025, and again on March 4, 2026 we completed a securitization of residual interests from other previously issued securitizations

in the amount of $50 million, $50 million, $65 million, and $50 million, respectively.

Interest expense for these residual interest financings

was $4.2 million for the three months ended March 31, 2026, compared to $2.7 million for the same period in 2025.

The following table presents

the components of interest income and interest expense and a net interest yield analysis for the three-month periods ended September 30,

2025, and 2024:

Three Months Ended September 30,

the components of interest income and interest expense and a net interest yield analysis for the three-month periods ended March 31, 2026,

Three Months Ended March 31,

(Dollars in thousands)

12 unchanged sentences

Annualized net interest income divided by average interest earning assets.

Three Months Ended September 30, 2025

Compared to September 30, 2024

Three Months Ended March 31, 2026

Compared to March 31, 2025

(In thousands)

7 unchanged sentences

Net interest income/spread

Our evaluation of the allowance for credit losses indicated that the reserves against future losses are adequate

as of September 30, 2025.

The allowance applies only to our finance receivables originated through December 2017, which we refer to as

our legacy portfolio.

Finance receivables that we have originated since January 2018 are accounted

for at fair value.

Under the fair value method of accounting, we recognize interest income net of expected credit losses.

Thus, no provision

for credit loss expense is recorded for finance receivables measured at fair value.

For the three months ended September

30, 2025, we recorded a reduction to provision for credit losses on finance receivables in the amount of $712,000.

The reserve decrease

was primarily due to better-than-expected recovery rates and a decrease in lifetime expected credit losses resulting from improved credit

performance as our previous estimates for future losses exceeded actual incurred losses.

This compares to $994,000 in reductions to provision

for credit losses for the three months ended September 30, 2024.

Under the fair value method

of accounting, we recognize interest income net of expected credit losses.

Thus, no provision for credit loss expense is recorded for

finance receivables measured at fair value.

Finance receivables acquired before 2018 are recorded at cost, and both their total balance

and activity is immaterial.

Sales expenses consist primarily

2 unchanged sentences

on volume of contract purchases.

Sales expense decreased by $41,000 to $5.7 million during the three months ended September 30, 2025,

from $5.7 million for the same quarter in 2024.

We purchased $391.1 million of new contracts during the three months ended September 30,

Sales expense increased by $641,000 to $6.6 million during the three months ended March 31, 2026, from

$5.9 million for the same quarter in 2025.

We purchased $533.2 million of new contracts during the three months ended March 31, 2026,

compared to $451.2 million in the prior year period.

Occupancy expenses were $1.5

million for the three months ending September 30, 2025, which is down from $1.3 million in the third quarter of 2024.

million for the three months ending March 31, 2026, which is up from $1.4 million in the first quarter of 2025.

Depreciation and amortization

expenses decreased to $225,000 compared to $249,000 in the previous year.

For the three months ended September 30, 2025,

we recorded income tax expense of $2.2 million, representing a 31% effective tax rate.

For the three months ended March 31, 2026, we

recorded income tax expense of $2.5 million, representing a 31% effective tax rate.

In the prior period, our income tax expense was $2.1

million, representing a 31% effective tax rate.

Comparison of Operating Results for the

nine months ended September 30, 2025 with the nine months ended September 30, 2024

the nine months ended September 30, 2025, our revenues were $325.1 million, an increase of $36.9 million, or 12.8%, from the prior year

revenue of $288.2 million.

The primary reason for the increase in revenues is the increase in interest income resulting from the increase

in the average outstanding balance of finance receivables measured at fair value.

Revenues for the nine months ended September 30, 2025

include a $6.5 million mark up to the recorded value of the finance receivables measured at fair value.

The marks are estimates based

on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables

and increases or decreases in our estimates of future net losses.

In the current period, our re-evaluation of the fair values of these

receivables resulted in a mark up for certain receivables and a mark down to the fair values of selected receivables.

The net effect of

the marks to the fair value resulted in a net mark up of $6.5 million.

There was a $16.0 million mark up to the fair value portfolio in

the prior year period.

Interest income for the nine

months ended September 30, 2025 increased $48.7 million, or 18.3%, to $314.5 million from $265.8 million in the prior year.

reason for the increase in interest income is the 17.1% increase in the average balance of our loan portfolio over the prior year period.

The interest yield on our total loan portfolio increased from 11.3% in the prior year period to 11.4% in the current year period.

interest yield on receivables measured at fair value is reduced to take account of expected losses and is therefore less than the yield

on other finance receivables.

The table below shows the average balance and interest yield of our loan portfolio for the nine months ended

September 30, 2025 and 2024:

Nine Months Ended September 30,

(Dollars in thousands)

Interest Earning Assets

Loan Portfolio

Other income was $4.1 million

for the nine months ended September 30, 2025 compared to $6.4 million for the comparable period in 2024.

This $2.3 million decrease was primarily driven by the decrease in origination and servicing fees we earned from third party receivables.

These fees were $4.1 million for the nine months ended September 30, 2025 compared to $5.5 million in the prior year period.

Our operating expenses

consist largely of interest expense, provision for credit losses, employee costs, sales and general and administrative expenses.

for credit losses is affected by the balance and credit performance of our portfolio of finance receivables (other than our portfolio

of finance receivables measured at fair value, as to which expected credit losses have the effect of reducing the internal rate of return

or the recorded value applicable to such receivables).

Interest expense is significantly affected by the volume of automobile contracts

we purchased during the trailing 12-month period and the use of our warehouse facilities and asset-backed securitizations to finance those

Employee costs and general and administrative expenses are incurred as applications and automobile contracts are received,

processed and serviced.

Factors that affect profit margins and net income include changes in the automobile and automobile finance market

environments, and macroeconomic factors such as interest rates and changes in the unemployment level.

Employee costs include base

salaries, commissions and bonuses paid to employees, and certain expenses related to the accounting treatment of outstanding stock options

and are one of our most significant operating expenses.

These costs (other than those relating to stock options) generally fluctuate with

the level of applications and automobile contracts purchased and serviced.

Other operating expenses consist

largely of facilities expenses, telephone and other communication services, credit services, computer services, sales and advertising

expenses, and depreciation and amortization.

Total operating expenses were

$304.3 million for the nine months ended September 30, 2025, compared to $268.1 million for the prior period, an increase of $36.2 million,

or 13.5% The increase is primarily due to increases in interest expense and a decrease in the reduction to provision for credit losses.

To a lesser extent, increases to sales expenses also contributed to the increase in operating expenses during the period.

Employee costs were $71.9 million

during the nine months ended September 30, 2025 compared to $72.3 million for the same period in the prior year.

The table below summarizes

our employees by category as well as contract purchases and units in our managed portfolio as of, and for the nine-month periods ended,

September 30, 2025 and 2024:

Nine Months Ended September 30,

(Dollars in millions)

Contracts purchased (dollars)

Contracts purchased (units)

Managed portfolio outstanding (dollars)

Managed portfolio outstanding (units)

Number of Originations staff

Number of Sales staff

Number of Servicing staff

Number of other staff

Total number of employees

General and administrative expenses

include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit

services, and telecommunications.

General and administrative expenses were $40.1 million for the nine months ended September 30, 2025,

a decrease of $141,000 from $40.3 million in the prior year period.

Interest expense for the nine

months ended September 30, 2025, was $172.7 million, compared to $138.7 million in the previous year, an increase of $34.0 million.

Interest on securitization

trust debt increased by $21.3 million for the nine months ended September 30, 2025, compared to the prior period.

The average balance

of securitization trust debt increased to $2,834.4 million for the nine months ended September 30, 2025, compared to $2,549.9 million

for the nine months ended September 30, 2024.

The annualized average rate on our securitization trust debt was 6.5% for the nine months

ended September 30, 2025, compared to 6.1% in the prior year period.

The blended interest rates on new term securitizations have been

increasing since 2022.

For each quarterly securitization transaction, the blended cost of funds is ultimately the result of many factors

including the market interest rates for benchmark swaps of various maturities against which our bonds are priced and the margin over

those benchmarks that investors are willing to accept, which in turn, is influenced by investor demand for our bonds at the time of the

securitization.

These and other factors have resulted in fluctuations in our securitization trust debt interest costs.

The blended interest

rates of our recent securitizations are summarized in the table below:

Blended Cost of Funds on Recent Asset-Backed Term Securitizations

Blended Cost of Funds

September 2024

Interest expense on warehouse

credit line debt increased by $7.4 million to $21.4 million for the nine months ended September 30, 2025 compared to $14.0 million in

the prior year period.

The increase was due to higher rates on the debt during the nine month period compared to last year.

balance of our warehouse debt was $304.6 million during the nine months ended September 30, 2025 compared to $170.7 million for the same

period in 2024.

The annualized average rate on our credit line debt was 9.4% for the nine months ended September 30, 2025 compared to

11.0% in the prior year period.

Interest expense on subordinated

renewable notes was $2.1 million for the nine months ended September 30, 2025.

The average balance of the outstanding subordinated debt

increased by $5.9 million to $28.0 million for the nine months ended September 30, 2025 compared to $22.1 million for the prior year.

The average yield of subordinated notes was 9.8% in the current and prior period.

In June 2021, March 2024, and

again on March 20, 2025, we completed a securitization of residual interests from other previously issued securitizations in the amount

of $50 million, $50 million, and $65 million, respectively.

Interest expense on the residual interest financing was $11.0 million for

the nine months ended September 30, 2025 compared to $6.2 million for the same period in 2024.

The following table presents

the components of interest income and interest expense and a net interest yield analysis for the nine-month periods ended September 30,

2025 and 2024:

Nine Months Ended September 30,

(Dollars in thousands)

Interest Earning Assets

Loan portfolio

Interest Bearing Liabilities

Warehouse lines of credit

Residual interest financing

Securitization trust debt

Subordinated renewable notes

Net interest income/spread

Net interest yield (2)

Ratio of average interest earning assets to average interest bearing liabilities

_________________________

balances are based on month end balances except for warehouse lines of credit, which are based on daily balances

(2) Annualized net interest income divided by average interest earning assets

Nine Months Ended September 30, 2025

Compared to September 30, 2024

(In thousands)

Interest Earning Assets

Loan portfolio

Interest Bearing Liabilities

Warehouse lines of credit

Residual interest financing

Securitization trust debt

Subordinated renewable notes

Net interest income/spread

Our evaluation of the allowance for credit losses indicated that the reserves against future losses are adequate

as of September 30, 2025.

The allowance applies only to our finance receivables originated through December 2017, which we refer to as

our legacy portfolio.

Finance receivables that we have originated since January 2018 are accounted

for at fair value.

Under the fair value method of accounting, we recognize interest income net of expected credit losses.

Thus, no provision

for credit loss expense is recorded for finance receivables measured at fair value.

For the nine months ended September

30, 2025, we recorded a reduction to provision for credit losses on finance receivables in the amount of $2.5 million.

The reserve decrease

was primarily due to better-than-expected recovery rates and a decrease in lifetime expected credit losses resulting from improved credit

performance as our previous estimates for future losses exceeded actual losses incurred.

This compares to $4.6 million in reductions to

provision for credit losses for the nine months ended September 30, 2024.

Sales expenses consist primarily

of commission-based compensation paid to our employee sales representatives.

Our sales representatives earn a salary plus commissions

based on volume of contract purchases and sales of ancillary products and services that we offer our dealers.

Sales expense increased

to $17.3 million during the nine months ended September 30, 2025 from $16.5 million in the same period in 2024.

We purchased $1,275.3

million of new contracts during the nine months ended September 30, 2025 compared to $1,224.1 million in the prior year period.

Occupancy expenses were $4.0

million for the nine months ending September 30, 2025, which is down from $4.3 million for the same period in 2024.

Depreciation and amortization

expenses increased to $705,000 compared to $650,000 in the previous year.

nine months ended September 30, 2025, we recorded income tax expense of $6.4 million, representing a 31% effective tax rate.

period, our income tax expense was $6.0 million, representing a 30% effective tax rate.

Credit Experience

8 unchanged sentences

Total Managed Portfolio (Excludes Third Party

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

December 31, 2025

7 unchanged sentences

Delinquencies as a percentage of gross servicing portfolio

Total delinquencies and amount in repossession as a percentage of gross servicing portfolio

Total delinquencies and amount in repossession as a percentage of

gross servicing portfolio

Extension Experience

5 unchanged sentences

____________________________________

(1) All amounts and percentages are

based on the amount remaining to be repaid on each automobile contract.

The information in the table represents the gross principal amount

of all automobile contracts we have purchased, including automobile contracts subsequently sold in securitization transactions that we

continue to service.

The table does not include certain contracts we have serviced for third parties on which we earn servicing fees

only and have no credit risk.

(2) We consider an automobile contract

delinquent when an obligor fails to make at least 90% of a contractually due payment by the following due date, which date may have been

extended within limits specified in the Servicing Agreements.

The period of delinquency is based on the number of days payments are contractually

All amounts and percentages are based on the amount remaining to be repaid on each automobile contract.

The information in the table

represents the gross principal amount of all automobile contracts we have purchased, including automobile contracts subsequently sold

in securitization transactions that we continue to service.

The table does not include certain contracts we have serviced for third parties

on which we earn servicing fees only and have no credit risk.

We consider an automobile contract delinquent when an obligor fails to make at least 90% of a contractually due payment by the following

due date, which date may have been extended within limits specified in the Servicing Agreements.

The period of delinquency is based on

the number of days payments are contractually past due.

Automobile contracts less than 31 days delinquent are not included.

The delinquency aging categories shown in the tables reflect

the effect of extensions.

(3) Amount in repossession represents

financed vehicles that have been repossessed but not yet liquidated.

(4) Amount in repossession and accounts past

due more than 90 days are on non-accrual.

The delinquency

aging categories shown in the tables reflect the effect of extensions.

Amount in repossession represents financed vehicles that have been repossessed but not yet liquidated.

Amount in repossession and accounts past due more than 90 days are on non-accrual.

Net Charge-Off Experience (1)

Total Managed Portfolio

(Excludes Third Party Portfolio)

Total Managed Portfolio (Excludes Third Party

Finance Receivables Portfolio

September 30,

(Dollars in thousands)

3 unchanged sentences

_________________________

(1) All amounts and percentages are based

on the principal amount scheduled to be paid on each automobile contract.

(2) Net charge-offs include the remaining principal

balance, after the application of the net proceeds from the liquidation of the vehicle (excluding accrued and unpaid interest) and amounts

collected subsequent to the date of charge-off, including some recoveries which have been classified as other income in the accompanying

interim consolidated financial statements.

September 30, 2025, and September 30, 2024, percentages represent nine months ended September

30, 2025, and September 30, 2024, annualized.

All amounts and percentages are based on the principal amount scheduled to be paid on each automobile contract.

Net charge-offs include the remaining principal balance, after the application of the net proceeds from the liquidation of the vehicle

(excluding accrued and unpaid interest) and amounts collected subsequent to the date of charge-off, including some recoveries which have

been classified as other income in the accompanying interim consolidated financial statements.

March 31, 2026, and March 31, 2025, percentages

represent three months ended March 31, 2026, and March 31, 2025, annualized.

December 31, 2025, represents 12 months ended December 31,

certain circumstances we will grant obligors one-month payment extensions to assist them with temporary cash flow problems.

we are bound by our securitization agreements to refrain from agreeing to more than two such extensions in any 12-month period and to

more than eight over the life of the contract.

The only modification of terms is to advance the obligor’s next due date by one month

and extend the maturity date of the receivable by one month.

In some cases, a two-month extension may be granted.

There are no other concessions

such as a reduction in interest rate, forgiveness of principal or of accrued interest.

In certain circumstances we

will grant obligors one-month payment extensions to assist them with temporary cash flow problems.

In general, an obligor will not be

permitted more than two such extensions in any 12-month period and no more than eight over the life of the contract.

The only modification

of terms is to advance the obligor’s next due date, generally by one month, though in some cases we may permit a longer extension,

and in any case an advance in the maturity date corresponding to the advance of the due date.

There are no other concessions such as a

reduction in interest rate, forgiveness of principal or of accrued interest.

Accordingly, we consider such extensions to be insignificant

delays in payments.

basic question in deciding to grant an extension is whether or not we will (a) be delaying the inevitable repossession and liquidation

10 unchanged sentences

psychological commitment to the contract on the obligor’s part.

credit assessment for granting an extension is initially made by our collector, who bases the recommendation on the collector’s

discussions with the obligor.

In such assessments the collector will consider, among other things, the following factors:

(1) the reason

the obligor has fallen behind in payment;

(2) whether or not the reason for the delinquency is temporary, and if it is, have conditions

changed such that the obligor can begin making regular monthly payments again after the extension;

(3) the obligor's past payment history,

including past extensions if applicable;

The credit assessment for granting an extension

is initially made by our collector, who bases the recommendation on the collector’s discussions with the obligor.

In such assessments

the collector will consider, among other things, the following factors:

(1) the reason the obligor has fallen behind in payments;

whether or not the reason for the delinquency is temporary, and if it is, have conditions changed such that the obligor can begin making

regular monthly payments again after the extension;

(3) the obligor's past payment history, including past extensions if applicable;

(4) the obligor’s willingness to communicate and cooperate on resolving the delinquency.

and (5) a numeric score from our internal risk assessment system that indicating the likelihood that the extension will prove beneficial.

If the collector believes the obligor is a good candidate for an extension, an approval is obtained from a supervisor, who will review

the same factors stated above prior to offering the extension to the obligor.

After receiving an extension, an account remains subject

to our normal policies and procedures for interest accrual, reporting delinquency and recognizing charge-offs.

believe that a prudent extension program is an integral component to mitigating losses in our portfolio of sub-prime automobile receivables.

The table below summarizes the status, as of September 30, 2025, for accounts that received extensions from 2011 through 2024:

If the collector believes the obligor is

a good candidate for an extension, he must obtain approval from his supervisor, who will review the same factors stated above prior to

offering the extension to the obligor.

During 2020 we incorporated an algorithmic extension score card which provides our staff with an

objective and quantitative assessment of whether or not a obligor is a good candidate for an extension, based on the current circumstances

of the account.

The extension score card was developed by our internal risk management team and is derived from the post-extension performance

of accounts in our managed portfolio.

After receiving an extension, an account remains

subject to our normal policies and procedures for interest accrual, reporting delinquency and recognizing charge-offs.

We believe that

a prudent extension program is an integral component to mitigating losses in our portfolio of sub-prime automobile receivables.

below summarizes the status, as of March 31, 2026, for accounts that received extensions from 2014 through 2025:

Period of Extension

# Extensions Granted

Active or Paid Off at September 30, 2025

% Active or Paid Off at September 30, 2025

Charged Off > 6 Months After Extension

% Charged Off > 6 Months After Extension

Active or Paid Off at March 31, 2026

% Active or Paid Off at March 31,

Charged Off > 6 Months After Extension

% Charged Off > 6 Months After

Charged Off <= 6 Months After Extension

% Charged Off <= 6 Months After

Avg Months to Charge Off Post Extension

2 unchanged sentences

serviced for third parties

view these results as a confirmation of the effectiveness of our extension program.

For example, of the accounts granted extensions in

2019, 57.6% were either paid in full or active and performing as of September 30, 2025.

Each of these successful accounts represent continued

payments of interest and principal (including payment in full in many cases), where without the extension we likely would have incurred

a substantial loss and no interest revenue after the extension.

For the extension accounts that

ultimately charge off, we consider any that charged off more than six months after the extension to be at least partially successful.

For example, of the accounts granted extensions in 2018 that subsequently charged off, such charge offs occurred, on average, 20 months

after the extension, indicating that even in the cases of an ultimate loss, the obligor serviced the account with additional payments

of principal and interest.

Additional information

about our extensions is provided in the tables below:

Nine Months Ended

September 30,

Nine Months Ended

September 30,

We view these results as a

confirmation of the effectiveness of our extension program.

We consider accounts that have had extensions and were active or paid off

as of March 31, 2026, to be successful.

Successful extensions result in continued payments of interest and principal (including payment

in full in many cases).

Without the extension, however, the account may have defaulted, and we would have likely incurred a substantial

loss and no additional interest revenue.

For extension accounts that

ultimately charged off, we consider accounts that charged off more than six months after the extension to be at least partially successful.

In such cases, despite the ultimate loss, we received additional payments of principal and interest that otherwise we would not have received.

information about our extensions is provided in the tables below:

Three Months Ended

Average number of extensions granted per month

4 unchanged sentences

and owned by third parties

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

December 31, 2025

18 unchanged sentences

Non-Accrual Receivables

is not uncommon for our obligors to fall behind in their payments.

However, with the diligent efforts of our Servicing staff and systems

for managing our collection efforts, we regularly work with our customers to resolve delinquencies.

Our staff are trained in employing

a counseling approach to assist our customers with their cash flow management skills and help them to prioritize their payment obligations

in order to avoid losing their vehicle to repossession.

Through our experience, we have learned that once a customer becomes greater than

90 days past due, it is not likely that the delinquency will be resolved and will ultimately result in a charge-off.

As a result, we do

not recognize any interest income for contracts that are greater than 90 days past due.

a contract exceeds the 90 days past due threshold at the end of one period, and then makes the necessary payments such that it becomes

less than or equal to 90 days delinquent at the end of a subsequent period, it would be restored to full accrual status for our financial

reporting purposes.

At the time a contract is restored to full accrual in this manner, there can be no assurance that full repayment of

interest and principal will ultimately be made.

However, we monitor each obligor’s payment performance and are aware of the severity

of his delinquency at any time.

The fact that the delinquency has been reduced below the 90-day threshold is a positive indicator.

the contract again exceed the 90-day delinquency level at the end of any reporting period, it would again be reflected as a non-accrual

policy for placing a contract on non-accrual status is independent of our policy to grant an extension.

In practice, it would be an uncommon

circumstance where an extension was granted and the account remained in a non-accrual status, since the goal of the extension is to bring

the contract current (or nearly current).

It is not uncommon for our

obligors to fall behind in their payments.

However, with the diligent efforts of our servicing staff and systems for managing our collection

efforts, we regularly work with our customers to resolve delinquencies.

Our staff is trained to employ a counseling approach to assist

our customers with their cash flow management skills and help them to prioritize their payment obligations to avoid losing their vehicle

to repossession.

Through our experience, we have learned that once a contract becomes greater than 90 days past due, it is more likely

than not that the delinquency will not be resolved and will ultimately result in a charge-off.

Contracts originated since January 2018

are accounted for at fair value and the economic impact of late payments is incorporated into the estimated net yield on those contracts.

Liquidity and Capital Resources

15 unchanged sentences

Net cash provided by operating

activities for the nine-month period ended September 30, 2025 was $213.2 million, an increase of $47.4 million, compared to net cash provided

by operating activities for the nine-month period ended September 30, 2024 of $165.8 million.

activities for the three-month period ended March 31, 2026 was $83.8 million, an increase of $9.9 million, compared to net cash provided

by operating activities for the three-month period ended March 31, 2026 of $73.9 million.

Net cash from operating activities is generally

2 unchanged sentences

Net cash used in investing activities

was $492.3 million for the nine months ended September 30, 2025 compared to $536.8 million in the prior year period.

Net cash used in

investing activities generally relates to new purchases of automobile contracts net of principal payments and other proceeds received

during the period.

Purchases of finance receivables excluding acquisition fees were $1,275.7 million and $1,195.9 million during the first

nine months of 2025 and 2024, respectively.

was $250.7 million for the three months ended March 31, 2026 compared to $194.1 million in the prior year period.

Net cash used in investing

activities generally relates to new purchases of automobile contracts net of principal payments and other proceeds received during the

Purchases of finance receivables excluding acquisition fees were $524.9 million and $449.6 million during the first three months

of 2026 and 2025, respectively.

Net cash provided by financing

activities for the nine months ended September 30, 2025 was $293.5 million compared to $524.7 million in the prior year period.

activities for the three months ended March 31, 2026 was $180.1 million compared to $166.3 million in the prior year period.

Cash provided

1 unchanged sentence

trust debt and net proceeds or repayments on our warehouse lines of credit and other debt.

In the first nine months of 2025, we issued

In the first three months of 2026, we issued

$345.6 million in new securitization trust debt compared to $442.4 million for the same period in 2025.

We repaid $957.6 million in

securitization trust debt in the nine months ended September 30, 2025 compared to repayments of securitization trust debt of $840.5 million

in the prior year period.

In the nine months ended September 30, 2025, we had net repayments on warehouse lines of credit of $72.3 million,

compared to net advances from warehouse lines of credit of $125.6 million in the prior year’s period.

We repaid $340.2 million in securitization

trust debt in the three months ended March 31, 2026 compared to repayments of securitization trust debt of $293.0 million in the prior

In the three months ended March 31, 2026, we had net advances on warehouse lines of credit of $141.5 million, compared to

net repayments from warehouse lines of credit of $45.8 million in the prior year’s period.

We purchase automobile contracts

14 unchanged sentences

at which we purchase automobile contracts.

We are and may in the future

be limited in our ability to purchase automobile contracts due to limits on our capital.

As of September 30, 2025, we had unrestricted

cash of $8.1 million and $271.0 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability

of sufficient eligible collateral).

As of September 30, 2025, we had approximately $8.5 million of such eligible collateral.

to manage our liquidity include maintaining our rate of automobile contract purchases at a level that matches our available capital, and,

as appropriate, minimizing our operating costs.

During the nine-month period ended September 30, 2025, we completed three securitizations

aggregating $1,280.7 million of notes sold.

Our liquidity will also be

affected by releases of cash from the trusts established with our securitizations.

While the specific terms and mechanics of each spread

account vary among transactions, our securitization agreements generally provide that we will receive excess cash flows, if any, only

if the amount of credit enhancement has reached specified levels and the net losses related to the automobile contracts in the pool are

below certain predetermined levels.

In the event delinquencies or net losses on the automobile contracts exceed such levels, the terms

of the securitization may require increased credit enhancement to be accumulated for the particular pool.

There can be no assurance that

collections from the related trusts will continue to generate sufficient cash.

Our warehouse credit facilities

contain various financial covenants requiring certain minimum financial ratios and results.

Such covenants include maintaining minimum

levels of liquidity and net worth and not exceeding maximum leverage levels.

In addition, certain of our debt agreements other than our

term securitizations contain cross-default provisions.

Such cross-default provisions would allow the respective creditors to declare

a default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to

be accompanied by acceleration of such other indebtedness.

As of September 30, 2025, we were in compliance with all such financial covenants.

We have and will continue to

have a substantial amount of indebtedness.

At September 30, 2025, we had approximately $3,435.2 million of debt outstanding.

consisted primarily of $2,916.4 million of securitization trust debt and $340.6 million of debt from warehouse lines of credit.

Our securitization

trust debt has increased by $322.1 million while our warehouse lines of credit debt has decreased by $70.3 million since December 31,

2024 (each net of deferred financing costs).

Since 2005, we have offered renewable subordinated notes to the public on a continuous basis,

and such notes have maturities that range from six months to 10 years.

We had $28.6 million and $26.5 million in subordinated renewable

notes outstanding at September 30, 2025, and December 31, 2024, respectively.

In June 2021, March 2024, and again on March 20, 2025, we

completed a securitization of residual interests from other previously issued securitizations in the amount of $50 million, $50 million,

and $65 million, respectively.

As of September 30, 2025, we have $149.5 million of the residual interest debt remains outstanding.

We are and may in the future be limited in our

ability to purchase automobile contracts due to limits on our capital.

As of March 31, 2026, we had unrestricted cash of $6.9 million

and $178.5 million aggregate available borrowings under our three warehouse credit facilities (assuming the availability of sufficient

eligible collateral).

As of March 31, 2026, we had approximately $5.3 million of such eligible collateral.

Our plans to manage our liquidity

include maintaining our rate of automobile contract purchases at a level that matches our available capital, and, as appropriate, minimizing

our operating costs.

During the three-month period ended March 31, 2026, we completed one securitizations aggregating $345.6 million

of notes sold.

Our liquidity will also be affected by releases

of cash from the trusts established with our securitizations.

While the specific terms and mechanics of each spread account vary among

transactions, our securitization agreements generally provide that we will receive excess cash flows, if any, only if the amount of credit

enhancement has reached specified levels and the net losses related to the automobile contracts in the pool are below certain predetermined

In the event delinquencies or net losses on the automobile contracts exceed such levels, the terms of the securitization may

require increased credit enhancement to be accumulated for the particular pool.

There can be no assurance that collections from the related

trusts will continue to generate sufficient cash.

Our warehouse credit facilities contain various financial covenants requiring certain

minimum financial ratios and results.

Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding

maximum leverage levels.

In addition, certain of our debt agreements other than our term securitizations contain cross-default provisions.

Such cross-default provisions would allow the respective creditors to declare a default if an event of default occurred with respect

to other indebtedness of ours, but only if such other event of default were to be accompanied by acceleration of such other indebtedness.

As of March 31, 2026, we were in compliance with all such financial covenants.

We currently have and will

continue to have a substantial amount of outstanding indebtedness.

At March 31, 2026, we had approximately $3,668.2 million of debt outstanding.

Such debt consisted primarily of $2,992.2 million of securitization trust debt, and also included $467.1 million of warehouse lines of

credit, $181.4 million of residual interest financing debt and $27.5 million in subordinated renewable notes.

Although we believe we are

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis